Montego Homes collapses into administration owing $2.5m, customers left with no insurance

One customer is set to lose a $30,000 deposit while the startling financial state of the company has been laid bare by investigators.

EXCLUSIVE

At least two customers of a collapsed building company are set to lose their deposits totalling $30,000 as new details emerge about the dire state of the firm’s financial situation.

Jessica* and her mum bought land in the Melbourne suburb of Doreen side-by-side, with plans to build their dream homes on the respective blocks. They both signed up to Montego Homes as their builder 18 months ago.

But unfortunately for the family, last week, Montego Homes went into voluntarily administration and ceased trading immediately, plunging the fate of 100 homeowners including them into jeopardy.

Sam Kaso and Shaun Matthews of insolvency firm Cor Cordis have been appointed as the administrators and halted all construction work while they hunt for a buyer.

At a creditor’s meeting held on Thursday, the appointed administrators revealed that Montego Homes owes $2.5 million to unsecured creditors.

Jessica does not appear to be covered by domestic builders insurance because as she was checking her and her mum’s paperwork, she realised they had never received a policy number.

“They (the building company) appear to have breached their responsibilities. They were supposed to purchase this insurance,” Jessica told news.com.au.

Jessica’s block of land in the Melbourne suburb of Doreen.

A total of 63 homeowners affected by the collapse didn’t have insurance.

At the creditor’s meeting, which finished on Thursday afternoon, the administrators revealed that their investigations had found that Montego Homes had taken out a $200,000 loan just before they went under.

There was only $21,000 left in its bank account when external administrators were appointed and there appears to be minimal assets.

Administrators have already started selling company property like iPads and phones at auction. It’s understood company cars were on leases so they are unlikely to generate any additional recovery money.

The ATO is a creditor, though it is not known how much it is owed.

Creditors have been warned a dividend is unlikely and the business will probably enter liquidation at the next creditor’s meeting.

Eleven staff lost their jobs as a result of the collapse.

News.com.au contacted Cor Cordis for additional comment.

Montego Homes was registered as a business on the Australian Securities and Investment Commission (ASIC) five years ago, in September 2019.

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Montego Homes owes $2.5 million to unsecured creditors.

The Montego Homes website which is still active.

Jessica, 40, was hoping to help her mother and be close by as she headed into her later years by organising the two homes to be built next to each other.

But now it looks like the single mum has burned $30,000 by way of deposit.

She says she is now “stuck” with a piece of land, unsure if she has lost her deposit entirely.

Jessica also said Montego Homes had tried to hit her with a $45,000 increase in the cost of building in a sign of the company being in financial strife for some time.

Montego Homes has signed up 78 residential building projects to the Victorian Managed Insurance Authority (VMIA) since 2021.

Unfortunately, it looks like Jessica and her mum were not among those building projects as they do not have insurance.

Last year, the collapse of major Victorian builder Porter Davis Homes sparked a major review into Victoria’s building regulations and prompted a government bailout package as hundreds of homeowners were left without insurance despite it being required under the law.

The scheme was widened to include any victims of a builder that had gone bust in the past 12 months and had not taken out insurance.

The scheme ends at the close of this month.

News.com.au has contacted Victoria’s premier, Jacinta Allan, for comment over whether she plans to extend the bailout package. At time of writing, she had not responded.

Jessica knows time is running out and fears without this scheme being extended, she won’t be able to apply in time. It only relates to liquidated building companies, not businesses under administration like Montego Homes currently is.

She has contacted her local member, Shaun Leane, who is understood to be petitioning the state government to extend the rescue scheme to help his constituents.

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Originally published as Montego Homes collapses into administration owing $2.5m, customers left with no insurance